An Empirical Analysis of the Fed's Term Auction Facility

Efraim Benmelech

No 18304, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The U.S. Federal Reserve used the Term Auction Facility (TAF) to provide term funding to eligible depository institutions from December 2007 to March 2010. According to the Fed, the purpose of TAF was to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations. The overall goal of the TAF was to ensure that liquidity provisions could be disseminated efficiently even when the unsecured interbank markets were under stress. In this paper I use the TAF micro-level loan data and find that about 60 percent of TAF loans went to foreign banks that pledged asset-backed securities as collateral for these loans. The data and analysis illustrate the major role that foreign - in particular, European - banks currently play in the U.S. financial system and the resultant currency mismatch in their balance sheets. The data suggest that foreign banks had to borrow from the Federal Reserve Bank to meet their dollar-denominated liabilities.

JEL-codes: E44 E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-mac and nep-mon
Note: AP CF EFG
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Citations: View citations in EconPapers (19)

Published as “An Empirical Analysis of the Fed’s Term Auction Facility,” CATO Papers on Public Policy, (2012), 2 57-91.

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